Investor Presentation December 2019 Disclosure: Forward-Looking - - PowerPoint PPT Presentation

Investor Presentation

December 2019

Disclosure: Forward-Looking Statements

2 This presentation contains, and the officers and directors of the Company may from time to time make, statements that are considered forward–looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of

• 1934. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our

control, which may include statements about our: business strategy; financial strategy; and plans, objectives, expectations, forecasts, outlook and intentions. All of these types of statements, other than statements of historical fact included in this presentation, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this presentation are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this presentation are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward- looking statements due to factors listed in the “Risk Factors” section in our filings with the U.S. Securities and Exchange Commission (“SEC”) and elsewhere in those filings. The forward- looking statements speak only as of the date made, and other than as required by law, we do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

Company Overview

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HEAVY CIVIL CONSTRUCTION - 84% of YTD’19 Revenues RESIDENTIAL CONSTRUCTION - 16% of YTD’19 Revenues

Concrete foundations for single family homes High margin, low CAPEX, quick turnaround slab work with fast cash cycles Low risk – operate exclusively in the high growth markets of Dallas-Fort Worth Metroplex and Houston Heavy highway, commercial concrete projects, aviation, and water containment/treatment Steady 3-5% growth; two-year average project duration Cost-driven

Sterling Construction is a leading heavy civil and residential construction company with strong competitive positions in the Western U.S.

NASDAQ: STRL HQ: The Woodlands, TX Employees: 2,000+ Projects underway: >140 Shares out: 27.3M Market cap: $396.9M TTM Revenues: $1,034.9M TTM EBITDA*: $54.6M Combined Backlog: $1,200M

TTM Revenues, EBITDA and Backlog as of 9/30/19; market cap as of 12/2/19. *See EBITDA Reconciliation on page 23

Recently announced Plateau Excavation acquisition provides new end markets and customers

Stock is Outperforming Market and Peers…and is Attractively Valued

S&P 500 Russell 2000 NASDAQ Forward P/E ‘20 7.6x 13.2x 19.8x 17.2x 23.4x 22.1x Forward EV/EBITDA ‘20 3.0x 5.8x 9.7x 11.9x 10.4x 14.3x

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Source: Bloomberg as of 12/2/19 *since IPO on May 4, 2018

Valuation vs. Peers

• 70%
• 50%
• 30%
• 10%

10% 30% 50% 70% 90% 110% 130% 11/22/2016 5/22/2017 11/22/2017 5/22/2018 11/22/2018 5/22/2019

3 Year Stock Price Trend

STRL GVA ROAD* S&P 500 Russell 2000 NASDAQ

Investment Considerations

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◼

Organic diversification of end-markets driving significant margin and EPS growth.

◼

Disciplined project execution with emphasis on value-driven delivery model.

◼

Operational and financial turnaround has been completed by strong and experienced management team.

◼

Attractive geographic footprint with favorable funding environment.

◼

Acquisition of Plateau provides diversification of revenue streams, a broad range of high-quality customers in rapidly growing end markets, increasing profitability and cash flow, and reduced execution risk for the Company overall; closed on October 2nd, 2019

◼

New credit agreement in conjunction with the Plateau acquisition establishes more traditional balance sheet structure with reduced cost

• f capital; significant de-levering anticipated in 2020 and 2021.

Sterling 3-Year Strategic Vision - Introduced in 2016

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Expansion into Adjacent Markets 15%+ margins Grow High Margin Products 50/50 Split at 12%+ margin Solidify the Base 7-8% 12% 10% 8% 6% 4% 2021 Blended Margin 2015 Margins

Threefold

margin improvement in 6 years 2 3

Key Objectives: Bottom-Line Growth, Risk Reduction, Exceed Peer Performance

2015 - Focused on Solidifying Base and not taking on losing jobs 2016 - Focused on Solidifying Base and began to Grow High Margin Products…Margins increased to 6.4% 2017 - Continued to Solidify Base, Grow High Margin Products, and began Expansion into Adjacent Markets w/ Tealstone Acquisition...Margins increased to 9.3% 2018 - Continued Elements 1&2 and began growing out Tealstone…Margins increased to 10.6% 2019 - Continued 2018 activities and focus on adding next adjacent Market…Combined Margins will increase to over 12% with the October 2nd, 2019 Plateau acquisition

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Key Objectives: Bottom-Line Growth, Risk Reduction, Exceed Peer Performance

Recent Project Awards Validate Strategy

Project Location Value Start Date I-15 Express Lane Extension Utah $94 million Q2’19 SH 34 Bridge Reconstruction Texas $33 million Q3’19 FM 51 Texas $23 million Q3’19 Old FM 471 & Talley Road Texas $22 million Q4’19 RT 15 Lake Elsinore Slab Replacements California $16 million Q4’19 I-5 Sacramento Precast Panels California $28 million Q1’20

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▪ Our RHB subsidiary leverages its highway expertise to also pave airport runways at a higher margin

HI

▪ Our RLW subsidiary has historically executed large scale projects across a multitude of end-markets in the Rockies, contributing to sustainable margin expansion

UT

Executing

• n

Strategy

How the Strategy has Driven Higher Margins

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

2015 2016 2017 2018 2019e 2020e

Gross Margin

Combined gross margin with Plateau expected to be ~14% by 2020

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Continued Focus on Bottom Line to Triple Gross Margin

Focused on Bottom-Line Growth as Opposed to Top-Line Growth

9 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% 500%

2015 2016 2017 2018 2019e Revenue Growth Gross Profit Growth

Margin growth outpaces revenue growth by approximately 4x

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Plateau Acquisition

October 2nd, 2019

Plateau Overview

Plateau is the leading provider of infrastructure improvement services in the Southeastern U.S. serving blue-chip customers in the data center, distribution center/warehousing (e-commerce and traditional retail), energy and other growing end markets. Headquarters: Austell, GA Employees: ~800 2018 Revenue: ~$290 million Three year Revenue CAGR: ~12% 2018 EBITDA: ~$76 million Backlog: ~$184 million as of 12/31/18

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Distribution Center/ Warehouse 51% E-Commerce 18% Data Center 10% Commercial & Residential 16% Energy & Other 5%

Backlog by End Market as of 12/31/18

Strong Relationships with High Profile Customers

▪ 86% of 2017 revenue was from returning customers ▪ 14-year average tenure with top 10 customers ▪ Provides Sterling with a whole new (and quickly growing) customer base including:

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Key Benefits to Sterling

▪ Strong earnings potential and cash generation.

> Can add ~$76 of EBITDA, providing strong free cash flow annually.

▪ Introduction to new markets.

> Plateau operates in attractive markets from both a margin and growth perspective. > Mainly excavate for data centers and warehouses, both

• f which are growing due to a rise in e-commerce,

migration of data to “The Cloud” and the continued prominence of internet activities

▪ Expansion into higher growth geographies

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▪ Higher value service with lower execution risk and better margins

Existing Sterling footprint

Plateau

Meets Sterling Acquisition Criteria

Higher value add in adjacent end markets with higher margins and lower execution risk End Market Diversification Great management team that stays with the business Strong performing business with significant growth potential Performs “like activities” to what we do today Immediately accretive

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Improving Margins, Reducing Risk, Adding Great People Improving Margins, Reducing Risk, Adding Great People

Transformative Characteristics

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Attractive Margins

Margins - ~26% GM and ~24% EBITDA Margin- significantly above Sterling core business.

Growth Potential

Plateau revenues expected to grow mid-to-high single digits annually for the foreseeable

• future. Mainly excavate for data centers and warehouses, both of which are growing due to

a rise in e-commerce, the migration of data to “The Cloud” and the Internet of Things.

Diversification

Diversification of revenue streams by end market, customer type and geographies.

Lower Risk

Quick turnaround, more stable projects doing activities we do every day.

High Free Cash Flow

Low capex requirements drive high free cash flow.

Combined Entity of ~$1.3 billion in Revenue and $130 million in EBITDA

Transaction Structure

▪ Total purchase price of $412 million; approximately 5.4x 2018 EBITDA ▪ Financed the acquisition and repaying existing higher interest rate term loan through a new $400 million term loan and $75 million revolver ▪ Closed on October 2nd, 2019 ▪ Key members of Plateau management remaining with company

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Combined Company Analysis

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($ in millions)

Sterling Plateau Combined Revenue ~1,000 ~290 ~1,290 EBITDA ~56 ~71* ~127 # of Employees ~2,000 ~800 ~2,800

Estimated Combined Annual Financials

Heavy Highway Construction 39% Other Heavy Civil Construction 28% Residential Construction 11% Plateau 22%

Revenues by End Market

Heavy Highway becomes <40% of Consolidated Revenue

*net of $5 mm of anticipated additional G&A expense

Recent Sterling Results and Guidance

Recent Results

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◼

YTD 2019 impacted by difficult weather conditions across much of operating footprint and an unfavorable mix shift, in addition the Heavy Civil segment is dealing with the delayed start of several large projects.

◼

Combined backlog and generally available cash at of $1.2 billion and $52 million, respectively, as of 9/30/19.

◼

Repurchased $7.9 million of our common stock (approximately 717,000 shares) and paid down $10.7 million of debt during the TTM September 2019.

◼

Double digit y/y adjusted net income increase, reflects focus

• n bottom-line growth strategy as opposed to top-line focus.

($MM) TTM September 2019 TTM September 2018 Revenue $1,035 $1,036 Gross Margin 9.8% 10.4% Net Income to STRL* $25.1 $22.6 EBITDA** $54.6 $52.3

*Adjusted for $2.2 million of acquisition costs in YTD Q3’19 results **See EBITDA Reconciliation on page 23

$- $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $1.10 $1.20 2018 2019E

EPS

FY’2019 Guidance & Modeling Considerations*

Revenue $1,065 - $1,085

• Adj. Net Income**

$29 - $30

• Adj. EPS**

$1.06 - $1.10 Gross Margin 10.5% - 11% G&A Expense as % of Revenue ~5% Other Expense Net $13 - $14 JV Non-Controlling Interest Expense $1 - $2 Expected Shares Outstanding ~27.3 mm

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*Dollars in millions except for EPS **See non-GAAP reconciliation on page 24

Investment Considerations

21 ◼

Organic diversification of end-markets driving significant margin and EPS growth.

◼

Disciplined project execution with emphasis on value-driven delivery model.

◼

Operational and financial turnaround has been completed by strong and experienced management team.

◼

Attractive geographic footprint with favorable funding environment.

◼

Acquisition of Plateau provides diversification of revenue streams, a broad range of high-quality customers in rapidly growing end markets, increasing profitability and cash flow, and reduced execution risk for the Company

• verall; closed on October 2nd, 2019.

◼

New credit agreement in conjunction with the Plateau acquisition establishes more traditional balance sheet structure with reduced cost of capital; significant de-levering anticipated in 2020 and 2021.

Contact Us

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Ron Ballschmiede Chief Financial Officer 281-214-0777 Fred Buonocore, CFA Senior Vice President 212-836-9607 fbuonocore@equityny.com Mike Gaudreau Associate 212-836-9620 mg@equityny.com

Company Representative

Sterling Construction Company, Inc.

Investor Relations Advisors

The Equity Group Inc.

EBITDA Reconciliation

EBITDA Calculation YTD Q3 2019 FY 2018 YTD Q3 2018 Net income attributable to Sterling common stockholders $ 17,600 $ 25,187 $ 19,580 Income tax expense $ 1,782 $ 1,738 $ 1,551 Interest expense $ 8,988 $ 12,350 $ 9,265 Interest income $ (986) $ (1,017) $ (604) Depreciation and Amortization $ 12,288 $ 16,770 $ 12,511 Acquisition related costs $ 2,158 $ - $ - Calculated Adjusted EBITDA $ 41,830 $ 55,028 $ 42,303 TTM EBITDA Roll Forward Q4 2018 EBITDA $ 55,028 YTD Q3 2018 EBITDA $ (42,303) YTD Q3 2019 EBITDA $ 41,830 TTM Adjusted EBITDA $ 54,555

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Non-GAAP Reconciliation

Forward-Looking Twelve Months Ended December 31, 2019 Guidance (GAAP) Adjustment(1) Adjusted (Non-GAAP) Net income attributable to Sterling common stockholders (Low Estimate) $16,000 $13,000 $29,000 Net income attributable to Sterling common stockholders (High Estimate) $17,000 $13,000 $30,000 Net income per share attributable to Sterling common stockholders (Low Estimate)(2) $ 0.59 $ 0.48 $ 1.06 Net income per share attributable to Sterling common stockholders (High Estimate)(2) $ 0.62 $ 0.48 $ 1.10 (1) The net income adjustment includes estimated full year acquisition related costs of approximately $4 million and approximately $9 million of early debt extinguishment cost related to the refinancing of our principle borrowing facility. (2) EPS is calculated based on an estimated 27.3M shares outstanding at December 31, 2019.

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